Rotation Report

Weekly recap and look ahead:

Four prior S&P 500 cycle turning points lining up suggest these next few weeks are the most important time of the year.  Do we know what it means?  No, but we must be ready for anything, because we know it'll likely be very significant.  

 Weeks ago I would've thought maybe it meant a top was near.  However, Thursday fired a VERY rare buy signal in the 'At The Money' sentiment indicator.  The last two times the signal fired were the Obama lows of 2012 and just after the January low this year.  That said, it's probably worth ignoring if the bulls don't really crack the whip this week.

Then Friday, after a nice bounce, the stock only A/D line took out last week's high ahead of the markets.  It generally pays to follow the advance decline line.

I've posted on the KRE (regional banks) lately, specifically a negative point of view.  However, there is an alternative view to take note of.  So far, this has found a higher low and perhaps a continuation wedge is forming.

Looking at the recently leading index IWM, we see a failed attempt to break down a bear flag.  At this point it's kind of chopping around with neutral momentum.  Until momentum turns bullish, it's likely this is working off an oversold condition.  

Friday brought a bullish engulfing day in the World Index.  Stakes are in the ground.

Rotation Report: 

Friday China made a new high relative to emerging markets as it continues to trade well.

Specialty Retail is strengthening in a big way.  Is this an early sign the consumer is picking up again?  Or just hopes of a strong back to school season?

Real Estate relative strength is on watch for a major bottom breakout.  

We're seeing great action in the tourism group as it's managed to hold the 10D MA last week.

Mining relative strength has really picked up during the correction and we're seeing positive reaction in the periphery groups.

Trade ideas:

Poland is starting to react to a positive RSI and RS divergence on the daily chart.  No doubt, Russia backing off the throttle eases a lot of investor nerves. 

For the longest of time, FSLR has traded in a rising wedge.  Last week it dropped below support and had a very strong bounce creating a wedge.  

RH has traded in an orderly channel into the 50D where buyers have shown up.  The group is showing strength right now.

A specialty retailer FIVE has traded in this compression for most of 2014.  A break over this resistance line would be big time.  To fully disclose, I've gotten family long this one this summer.

Barnes and Noble came out with business changing news last week.  Also, Amazon is getting a ton of heat from publishers.  Note the 17% short interest.

WUBA is very tight at long time support.  That's some tasty risk reward, isn't it?

KANG - A recent China IPO, it's traded tightly after a vicious move higher.  It could be an Ebola play, should concerns arise about it spreading to the far east.

Trade 'em well!